July 16, 2014

Law prohibits federal contractors from retaliating against employees who discuss their compensation

On April 8, 2014, President Obama issued an executive order prohibiting federal contractors from retaliating against employees who discuss their compensation. But this executive order only applies to federal contractors, so what about all other employees?

The National Labor Relations Act, passed in 1935, allows private sector employees to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection.”

Not all employees are covered by the National Labor Relations Act though. First, it only covers private sector employers, so employees of federal, state, and local governments are not covered. Second, supervisors who can make recommendations to hire and fire employees are not covered, nor are agricultural works or employers subject to the Railway Labor Act. Additionally, human resource employees cannot disclose the salaries of other employees, but can discuss their own salaries.

While there are social reasons why employees may not feel comfortable discussing pay, some employers also have pay secrecy policies – whether written or undocumented. The National Labor Relations Board has long found pay secrecy policies to be in conflict with the act and has brought action against employers for retaliating against employees for discussing their pay. However, only the NLRB can act on an employee’s complaint – the employee cannot sue the employer in court – and the damages that may result are back pay and reinstatement of the employee.

The new executive order raises the stakes for federal contractors: if a federal contractor retaliates against an employee, he or she risks losing the federal contract they are awarded as well.